By Tim Devaney - 04/09/14 04:10 PM EDT
Senate Democrats hope to crack down on credit reporting agencies that leave consumers on the hook for costly reporting errors.
Sens. Sherrod Brown (D-Ohio) and Brian Schatz (D-Hawaii) introduced the Stop Errors in Credit Use and Reporting (SECURE) Act on Wednesday to protect consumers from inaccurate credit reports and make it easier for them to correct and dispute any mistakes. The bill would also give consumers easier access to their credit scores.
The Senators pointed to a 2013 FTC study that found 20 percent of consumers had errors on their credit reports, and 5 percent suffered from much lower credit scores as a result, as a reason for their legislation.
"These errors shouldn't happen, and consumers shouldn't be punished for something they didn't do," Brown said in a call with reporters.
The SECURE Act would raise the accuracy requirements for credit reporting agencies, the senators said. It would also require them to investigate consumers' claims about errors in their reports, and it would provide consumers with a free credit score once a year.
Schatz pointed out that these errors can be costly, because they can impact the interest rates consumers receive on mortgages, car loans, and students loans, and can even affect their job status.
"If you want to live the American Dream, it's not enough to work hard, you also have to be credit worthy," Schatz said.
But all too often, consumers struggle to fix mistakes on their credit reports, because they don't know how to "assert their rights" and the agencies have little to no incentive to work with them, he added.
Brown called it a "bureaucratic nightmare."
"They're not paying enough attention to the consumer, and this will get their attention," he said.
Often times, the errors result from credit agencies mixing up consumers with similar names and addresses, the senators said. But these mistakes can take years to fix.
"In the meantime, they lose out on opportunities to buy homes or get a job, due to a mistake that they did not make," Brown said.
Schatz called this "unfair." He said their bill would raise the accuracy standards for credit reporting agencies and provides consumers with "remedies" to correct errors.
The bill would shift the burden of responsibility to the credit agencies that make the mistakes, Brown said.
"The responsibility is yours," he said, "not the person who was victimized by the error."